Residential property buys via SPV may not escape ABSD

[reporter2]

http://www.businesstimes.com.sg/arch...-absd-20130126

Published January 26, 2013

Residential property buys via SPV may not escape ABSD

Special purpose vehicle arrangements may be disregarded, says IRAS

By Felda Chay


CORPORATE entities seeking to avoid paying the additional buyers' stamp duty (ABSD) by buying shares in special purpose vehicles that own properties could come under the scrutiny of the tax authorities.

The Inland Revenue Authority of Singapore (IRAS), in a letter responding to a Business Times article on such deals, said: "When the company buys a residential property, it will be subject to ABSD, and at the highest ABSD rate of 15 per cent. Under the Stamp Duties Act, the Commissioner of Stamp Duties may disregard or vary any arrangement to counteract any reduction in or avoidance of duty payable by that person.

"The Inland Revenue of Authority of Singapore audits stamp duty transactions to detect transactions that are conducted for tax avoidance purposes."

Transaction of real estate through SPVs is not a new phenomenon; funds in particular are known to do it. But the government's latest move to raise the ABSD to a hefty 15 per cent from 10 per cent for corporate entities has made it more attractive for companies to consider this route.

This is because the ABSD applies only when investors buy the units of a development directly, but it does not apply when the transaction is through the sale of shares in companies - even if they own real estate.

Experts had said therefore that this would be especially attractive for corporate entities, especially those looking to purchase luxury residential property.

On Tuesday, Savills placed an ad in BT for the sale of 36 units at Goodwood Residence through an SPV that owns the apartments. Then on Wednesday, Jones Lang LaSalle put on the market 21 Anderson, Royal Oak Residence, with a similar arrangement as one of the available purchase options.

JLL said: "Whilst the vendor is selling the asset, potential investors may also consider acquiring shares in the company that owns the property, thereby realising Additional Buyers' Stamp Duty (ABSD) savings."

[kane]

no escape man. they will press every loophole.

[bargain hunter]

no leh. i think its not easy to catch the buyers of SPV. any way for IRAS to track them down?

[yowetan]

When will my Mt sinai property be corrected?

[kane]

no leh. i think its not easy to catch the buyers of SPV. any way for IRAS to track them down?

force all developers to declare their SPVs and any change in ownership. those who are found non compliant will be fine x times over the ABSD in question.

those assets must be held under some vehicle or entity. so from there you trace.

where there is a will there is a way...

oops, maybe I gave them too many ideas liao. haha.

[bargain hunter]

but the 2 recent advertisements in question (36 units of goodwood residence and the royal oak residence at anderson road) are put up for sale by previously incorporated SPVs which are not by developers. the goodwood residence one should be the kuwaiti fund which was trapped after buying from guocoland after the 2007 peak.

http://business.asiaone.com/Business...702-74119.html

kuwaitis bot at 2800psf. some rich local, please bid 2240psf to end their misery.

i am sure there are those smart pple who have just 1 or 2 ppties in each SPV which they can sell. how to track?!

force all developers to declare their SPVs and any change in ownership. those who are found non compliant will be fine x times over the ABSD in question.

those assets must be held under some vehicle or entity. so from there you trace.

where there is a will there is a way...

oops, maybe I gave them too many ideas liao. haha.

[kane]

those already gone into SPV cannot be tracked. those that haven't gone into SPV still can track lor. anyway, we don't have a habit of going retrospective.

[bargain hunter]

yup. that's what i meant. i m sure a lot of smart pple own a lot of ppties in SPVs already.

and u r right. loophole for new injections into SPVs r now closed.

those already gone into SPV cannot be tracked. those that haven't gone into SPV still can track lor. anyway, we don't have a habit of going retrospective.